The market stabilized in May. The VIX Index, a measurement of anticipated market volatility closed at 26.19 a significant reduction from April’s close of 33.40. Equity market returns was mixed.

Again, Value outperformed Growth. The Russell 2000 and 1000 Value Index were both around up 2.0% for the month. The Russell 2000 and 1000 Growth Index were both down 2.30% and 1.90% as higher rates continued to weigh on the more levered companies most notably the technology, media, and telecom sectors. Since the beginning of the year Value has outperformed Growth by over 10%. Below is a graph of the intermonth performance for the Russell Indexes noted above.

Energy costs continued to grind higher in May. Natural Gas and Crude Oil were both up over 10%. Gasoline futures were up a staggering 17% in May. Year to date gasoline is up over 80%.

Energy pressures, a tight labor market and rising input costs have weighed heavily on inflation. The year-on -year CPI (Consumer Price Index) is now over 8%. As inflation continues to grind higher the market is pricing in much more aggressive rate hikes by the Federal Reserve.

The market did take comfort when the minutes of the April FOMC meeting were release on May 19th that eased concerns that the Fed was behind the curve. The additional 225 basis points of overnight hikes price into the market currently appear to be adequate at this point.

Silver was down over 5% in May and gold was down 3%. Year to date Silver is down 7%, Gold is up 1%. I refer to this as gold and silver are often hailed as great inflations hedges. Last May CPI was 4.60%, today we are at 8.30%. Since May of last year Silver is down over 20%, Gold 4%.

As we mentioned in our previous newsletters, short term volatility has little impact on long term investment results. A well-diversified balance portfolio is a time-tested strategy for long term capital. This market volatility is common.

As always please reach out if you have any questions.

Best regards,
Bob

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Statistics sources from Central Bank Rates and Bloomberg